The Daily Reckoning UK

Do You Remember The Three-Day Week?

David Stevenson

by

Posted 10th June 2016

I – just about – do.

The ‘Three-Day Week’ in early 1974 was a pretty desperate period in British history.

It was introduced by the then-Tory government to conserve electricity in the face of ‘industrial action’ (the cult name for strikes) by the UK’s coal miners.

From 1 January until 7 March 1974 commercial electricity users were limited to three specified consecutive days’ consumption each week and not allowed to work longer hours.

Only essential services such as hospitals, supermarkets and newspapers (!) were exempt. This was long before the days of SKY and the internet, meaning that TV companies were required to stop broadcasting at 10:30pm.

No, this piece isn’t about Brexit – whichever way the electorate decides to vote. In fact, this isn’t about politics.

But due to those strikes, there was a large electricity shortfall. As a result, everything else ground to a halt.

We could be heading back to those dark days

For – admittedly very different reasons – a similar situation could develop over the next few years.

Increasing pressure from Europe and ‘the green crowd’ has forced the government to propose that all our coal power stations should be shut down by 2025, with their use being restricted by 2023.

That’s less than seven years away. And you can be sure that electricity supply problems will start before then.

Sure, there’s been some talk that the government is considering back-tracking on this coal-cutback pledge.

If power producers can partly cut emissions using fledgling carbon capture and storage (CCS) technology, the word is they may be allowed to continue to operate their plants. But there’s still a lot of uncertainty on this score.

Diehard environmental crusader and former-US Vice President Al Gore has even claimed that the decision by PM David Cameron to phase out the UK’s “unabated” coal power stations by 2025 “sets an excellent and inspiring precedent”.

“The UK is demonstrating the type of leadership that nations around the world must take in order to….solve the climate crisis”, he says.

“The UK has become the first major economy to set a clear date to phase out coal and I am hopeful that others will follow suit.”

Thanks Al. I’d say this is a typically utopian and air-headed view from a non-British resident who won’t have to face the results of such a policy.

Why am I worried? At the end of 2015, coal-fired power stations accounted for 20% of our total national energy generation. If that gets chopped, what’ll replace it?

Will it be nuclear power? Britain currently has 16 reactors that generate around a sixth of the UK’s electricity. Yet all but one will be retired by 2023. Under present power plant construction plans, nuclear will fall off the radar.

Unless our climate suddenly becomes much sunnier and windier, wind and solar won’t have the clout to bridge the gap. So we’re facing a very serious supply shortfall.

And that’s at today’s consumption rate. In fact, Britain’s power demand is set to grow substantially as technology advances.

Without urgent action, the supply gap will be huge

With supply down and demand up, the Institution of Mechanical Engineers (IMechE) has forecast that “the loss of coal by 2025, along with growth in demand and the closure of the majority of our nuclear power stations, [will] leave a potential supply gap of 40%–55%, depending on wind levels.”

Dr Jenifer Baxter, IMechE’s Head of Energy and Environment, has predicted that: “under current policy, it is almost impossible for UK electricity demand to be met.”

Ian Marchant, former Head of power supplier Scottish and Southern Energy, believes we’re not only heading for a crisis but that we actually need one so that the government will do something about it.

A subsequent Bloomberg article was headlined: “Britain Needs 30 Gas Plants by 2025 to Fill Power Supply Gap”.

The Sun has said that: “The madness of rapidly closing down our old power stations on environmental grounds and not replacing them is blindingly obvious to anyone outside Whitehall. We haven’t got a prayer of building the plants we need to avert potential calamity in just ten years”.

While there’s been a lot of debate about the IMechE forecasts, no one disputes there’s a looming UK power supply problem.

The answer, of course, is bleedin’ obvious. Build lots more power stations…along with several other things the country sorely requires such as better roads and more railways. In short, our national infrastructure needs rebuilding.

This isn’t just a pipe dream. It’s urgent.

Indeed, global ratings agency Standard and Poor’s says that the UK would derive more economic benefit from increased public spending on infrastructure than would any other major world economy with the exception of Brazil.

Inadequate infrastructure investment is one of the main reasons why UK productivity lags behind the average of the rest of the G7 economies.

Over the coming weeks I’ll be spelling out exactly what’s being done in this country, what needs to be built now…and how you can make good money from long-term investment in Britain’s infrastructure businesses.

It promises to be an exciting and profitable journey.

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